Decision No. 653/2001/QD-NHNN On the Issuance of the Regulation on the Organization and Implementation of State Foreign Exchange Reserves Management Tasks

 

Chapter 2

MANAGEMENT OF FOREIGN EXCHANGE RESERVE INVESTMENT ACTIVITIES

Article 5. Investment Transactions of State Foreign Exchange Reserves

1. State foreign exchange reserves are invested through the following transactions:

a. Depositing foreign currencies and gold domestically and internationally;

b. Buying and selling foreign currencies and gold overseas;

c. Purchasing and selling foreign exchange bills, promissory notes, and foreign-denominated debt securities issued or guaranteed by governments of other countries, foreign banks, financial organizations, or international banks.

2. Other investment transactions outside those mentioned in Clause 1 of this Article are proposed by the Trading Department and submitted to the Governor for approval according to the procedure specified in Clause 1, Article 19 of this Regulation for submission to the Prime Minister.

Article 6. Establishing Standards and Limits for State Foreign Exchange Reserve Investments

1. Every six months or as necessary, the Department of Foreign Exchange Management, in collaboration with the Trading Department, reviews the standards and limits for State foreign exchange reserve investments of the previous period, establishes new standards and limits, and submits the following items to the Governor for decision according to the procedure specified in Clause 1, Article 19 of this Regulation:

a. Standards for selecting partner organizations for State foreign exchange reserve investments;

b. Limits on foreign currencies and gold for investment in a single partner organization;

c. Standards for selecting foreign exchange bills, promissory notes, and foreign-denominated debt securities for State foreign exchange reserve investments;

d. The ratio of investment in foreign exchange bills, promissory notes, and foreign-denominated debt securities to the total State foreign exchange reserves.

2. The Head of the Management Board directs relevant functional departments and the Trading Department to implement the standards and limits for State foreign exchange reserve investments according to the decision of the Governor of the State Bank of Vietnam.

Article 7. Developing, Deciding, and Implementing State Foreign Exchange Reserve Investments

1. The investment plan for State foreign exchange reserves is based on:

a. The structure of the foreign exchange reserve fund and the exchange rate and gold price stabilization fund that have been decided;

b. Standards for selecting partner organizations for investment; investment limits in a single partner organization; standards for selecting foreign exchange bills, promissory notes, and foreign-denominated debt securities for State foreign exchange reserve investments; and the ratio of investment in foreign exchange bills, promissory notes, and foreign-denominated debt securities to the total State foreign exchange reserves as decided by the Governor.

2. On a quarterly basis or as necessary, the Trading Department shall be responsible for developing investment plans for the State foreign exchange reserve based on the provisions set forth in Clause 1 of this Article to submit to the Head of the Management Board for decision.

3. Decision-making authority for investments.

a. The Director of the Trading Department is authorized to decide on implementing investments with a value equivalent to less than 20,000,000 USD (twenty million US dollars);

b. The Head of the Management Board shall decide on investments with a value equivalent to 20,000,000 USD (twenty million US dollars) or more.

4. The Trading Department shall be responsible for organizing the implementation of investment plans; monitoring the investment activity developments to report monthly or at any time when the market fluctuates to the Governor, the Head of the Management Board, and propose new investment plans suitable to the situation.

5. On a semi-annual basis or as necessary, the Trading Department shall be responsible for evaluating the implementation of the standards, limits, and ratios of investment as stipulated in Article 6 of this Regulation. Coordinate with the Foreign Exchange Management Department to establish and adjust the standards, limits, and ratios of investment to ensure safety and efficiency during the investment process.

Chapter 3

MANAGEMENT OF THE FOREIGN EXCHANGE RESERVE FUND

Article 8. Establishing and deciding on the structure of the foreign exchange reserve fund

1. Basis for establishing the structure of the foreign exchange reserve fund

a. Proportion of various foreign currencies used in the settlement of import and export transactions of goods and services in Vietnam;

b. Proportion of various foreign currencies used in foreign borrowing and repayment activities of Vietnam;

c. Forecast of trends in the fluctuation of exchange rates of stored foreign currencies and gold prices domestically and internationally;

d. Trends in the proportion of certain foreign currencies in international reserves and payments of countries around the world.

2. The structure of the foreign exchange reserve fund includes: The ratio of reserves in foreign currency and gold; types of foreign currency and their respective ratios, short-term, medium-term, and long-term investment ratios.

3. On a semi-annual basis or as necessary, the Foreign Exchange Management Department shall lead and coordinate with the Trading Department to evaluate the current reserve structure and develop the structure of the foreign exchange reserve fund suitable to the new situation to submit to the Governor for decision according to the procedure specified in Clause 1, Article 19 of this Regulation.

4. In case of fluctuations in the foreign exchange market domestically and internationally, the Trading Department shall have the responsibility to report to the Head of the Management Board, notify the Foreign Exchange Management Department for consideration and proposal of adjustment plans for the foreign exchange reserve fund structure to submit to the Governor for decision according to the procedure specified in Clause 1, Article 19 of this Regulation.

5. The Governor decides or delegates the Head of the Management Board to decide on the structure of the foreign exchange reserve fund for each period.

Article 9. Principles for transferring foreign exchange

The transfer of foreign exchange from the foreign exchange reserve fund to the foreign exchange rate stabilization and gold price fund shall be carried out as follows:

1. In cases where the amount of foreign exchange in the foreign exchange rate stabilization and gold price fund is insufficient to meet intervention requirements, the Foreign Exchange Management Department shall propose the transfer of foreign exchange from the foreign exchange reserve fund to the foreign exchange rate stabilization and gold price fund and submit it to the Governor for approval according to the procedure specified in Clause 1, Article 19 of this Regulation to be submitted to the Prime Minister for approval.

2. After receiving approval from the Prime Minister, the Trading Department shall carry out the transfer of foreign exchange from the foreign exchange reserve fund to the foreign exchange rate stabilization and gold price fund according to the Governor's Decision of the State Bank of Vietnam.

Article 10. Advance from the foreign exchange reserve fund to the State Budget

The advance from the foreign exchange reserve fund to the State Budget, monitoring, and recovery of advances shall be carried out as follows:

1. The Foreign Exchange Management Department drafts the Governor's Decision of the State Bank of Vietnam regarding the advance from the foreign exchange reserve fund to the State Budget to submit to the Governor for signing and issuance when all legal bases are available as follows:

a. The Prime Minister's Decision on the advance from the foreign exchange reserve fund to the State Budget.

b. A letter from the Ministry of Finance sent to the State Bank of Vietnam requesting an advance for the State Budget;

2. The Trading Department shall make the advance from the foreign exchange reserve fund to the State Budget according to the Governor's Decision of the State Bank of Vietnam.

3. The Trading Department shall record, monitor, and recover the advances made to the State Budget.

Chapter 4

MANAGEMENT OF THE FOREIGN EXCHANGE RATE STABILIZATION AND GOLD PRICE FUND

Article 11. Establishing and deciding on the structure of the foreign exchange rate stabilization and gold price fund

1. Basis for establishing the structure of the foreign exchange rate stabilization and gold price fund:

a. Forecast of exchange rate fluctuations domestically and internationally of stored foreign currencies;

b. Forecast of gold price fluctuations domestically and internationally;

c. Type of foreign currency used for intervention.

2. Content of the structure of the foreign exchange rate stabilization and gold price fund includes: Ratio of reserves in foreign currency and gold, ratio of physical gold stored domestically and abroad, type of foreign currency and their respective ratios, ratio of deposits without term and with term (less than one year).

3. On a semi-annual basis or as necessary, the Foreign Exchange Management Department shall develop the structure of the foreign exchange rate stabilization and gold price fund to submit to the Head of the Management Board for decision.

Article 12. Import and export of standard international gold

1. Based on the domestic gold market intervention needs, national security requirements, the structure of the foreign exchange rate stabilization and gold price fund, the Foreign Exchange Management Department shall determine the volume of standard international gold required for import and export to submit to the Governor for decision according to the procedure specified in Clause 1, Article 19 of this Regulation.

2. The Trading Department shall implement the import and export of gold according to the Governor's Decision of the State Bank of Vietnam and report the implementation status to the Governor, also sending to the Head of the Board and other Board members.

Article 13. Developing and implementing intervention plans in the foreign exchange market

1. The State Bank of Vietnam shall intervene in the domestic foreign exchange market through the following operations:

a. Buying foreign exchange with Vietnamese Dong;

b. Selling foreign exchange to collect Vietnamese Dong.

2. Based on domestic exchange rate and gold price fluctuations, monetary policy objectives, and exchange rate policies for each period, the Foreign Exchange Management Department shall propose intervention plans for buying or selling foreign exchange to submit to the Head of the Management Board.

3. The contents of the intervention plan for purchasing or selling foreign exchange include: the time of intervention, the type of foreign currency to be intervened, the exchange rate or gold price for intervention, the quantity of foreign currency or gold to be intervened, the form of intervention (spot, swap, forward, and other foreign exchange transactions), and the counterparties implementing the intervention.

4. The Head of the Management Board approves the intervention plan to submit to the Governor for approval.

5. The Trading Department implements the intervention plan and reports to the Governor of the State Bank and the Head of the Management Board.

6. When there are fluctuations in the domestic and international foreign exchange markets, the Trading Department promptly informs the Head of the Management Board and simultaneously sends the Foreign Exchange Management Department information on supply and demand for foreign currencies or gold, market activity developments to serve as a basis for management and to propose timely intervention plans.

Article 14. Operation of the inter-bank foreign exchange market

1. The Trading Department is responsible for operating the inter-bank foreign exchange market; monitoring exchange rate movements and supply-demand relationships in the market to propose daily foreign exchange buying and selling activities of the State Bank for submission to the Head of the Management Board for decision.

2. The Trading Department is responsible for informing the Foreign Exchange Management Department of the daily volume of foreign exchange purchased or sold by the State Bank in the inter-bank foreign exchange market so that the Foreign Exchange Management Department can draft reports for submission to the Prime Minister for signature.

Article 15. Transfer of foreign exchange from the Exchange Rate Stabilization Fund and Gold Price Stabilization Fund to the Foreign Exchange Reserve Fund.

By no later than the 10th day of the first month of each quarter, when the Exchange Rate Stabilization Fund and Gold Price Stabilization Fund exceed their approved limits, the Trading Department proposes the transfer of excess foreign exchange reserves to the Foreign Exchange Reserve Fund and implements the transfer after approval by the Head of the Management Board.

Chapter 5

AUTHORITY TO MANAGE THE STATE FOREIGN EXCHANGE RESERVE

Article 16. Contents within the authority to decide of the Prime Minister:

1. The annual level of the State foreign exchange reserve proposed by the Governor of the State Bank;

2. The limit of foreign exchange in the Exchange Rate Stabilization Fund and Gold Price Stabilization Fund;

3. Transfers from the Foreign Exchange Reserve Fund to the Exchange Rate Stabilization Fund and Gold Price Stabilization Fund at the proposal of the Governor of the State Bank;

4. Temporary advances from the Foreign Exchange Reserve Fund to the State Budget to meet urgent needs of the State as proposed by the Minister of Finance;

5. New forms and business operations of foreign exchange reserve investment.

Article 17. Contents within the authority of the Governor of the State Bank.

1. Issuing Decisions to implement temporary advances from the Foreign Exchange Reserve Fund to the State Budget according to the Decision of the Prime Minister;

2. Deciding on the import and export of standard gold belonging to the State foreign exchange reserve;

3. Deciding on the intervention plan for the domestic foreign exchange market;

4. Deciding on the structure of the Foreign Exchange Reserve Fund;

5. Deciding on the standards and limits of State foreign exchange reserve investment;

6. Approving and signing reports submitted to competent authorities as stipulated in Clause 2, Article 21 of this Regulation.

Article 18. Contents within the authority of the Head of the Management Board.

1. Deciding on the structure of the Exchange Rate Stabilization Fund and Gold Price Stabilization Fund;

2. Deciding on the structure of the Foreign Exchange Reserve Fund during each period under the authorization of the Governor of the State Bank;

3. Deciding on investment plans and investments with a value of 20,000,000 USD (Twenty million US dollars) or more;

4. Deciding on the daily foreign exchange buying and selling activities of the State Bank in the inter-bank foreign exchange market as provided for in Article 14 of this Regulation;

5. Directing relevant Departments and the Trading Department to organize the implementation of State foreign exchange reserve investment standards and limits as decided by the Governor of the State Bank;

6. Deciding on the transfer of foreign exchange from the Exchange Rate Stabilization Fund and Gold Price Stabilization Fund to the Foreign Exchange Reserve Fund when the foreign exchange level of the Exchange Rate Stabilization Fund and Gold Price Stabilization Fund exceeds the limit determined by the Prime Minister.

Article 19. Decisions on managing the State foreign exchange reserve

1. For matters within the approval or decision-making authority of the Governor:

Relevant Departments and the Trading Department prepare the content according to assigned tasks as stipulated in this Regulation through the Management Board for submission to the Governor for approval or decision.

2. For matters within the authority of the Head of the Management Board:

Relevant Departments and the Trading Department prepare the content according to assigned tasks for submission to the Head of the Management Board for decision.

Chapter 6

INFORMATION DISCLOSURE AND REPORTING REGIME

Article 20. Provide information

Information provision to support the management of the State foreign exchange reserve is carried out as follows:

1. The Monetary Policy Department provides to the Foreign Exchange Management Department:

a. No later than the 25th day of the last month of each quarter: Estimated figures on the actual balance of payments in the quarter and forecast for the next quarter;

b. No later than the last working day of the first month of each quarter: Figures and actual performance of the balance of payments in the previous quarter, monetary statistics of the entire industry and the State Bank in the previous quarter;

c. No later than November 20 each year: Estimated figures on the actual balance of payments in the year and forecast for the planning year;

d. No later than February 10 each year: Figures and actual performance of the balance of payments in the previous year, monetary statistics of the entire industry and the State Bank in the previous year.

2. The Trading Department provides to the Foreign Exchange Management Department, the Monetary Policy Department, and the General Supervision Department:

a. No later than the 5th day of each month: Figures on the Foreign Exchange Reserve Fund and the Exchange Rate Stabilization Fund and Gold Price Stabilization Fund of the previous month (according to attached forms 01, 02, 03, and 04);

b. Daily, providing to the Foreign Exchange Management Department figures on the previous day's activities in the inter-bank foreign exchange market and an assessment of foreign exchange supply and demand in the market.

3. No later than the 20th day of the first month of each quarter or when necessary, the Trading Department provides to the Foreign Exchange Management Department documents evaluating the ranking of correspondent banks in the previous quarter including: Evaluation documents of the Trading Department (based on international credit rating company standards such as Moody's Investors, Standard and Poor's, or International Ban Credit Agency - IBCA) and documents of the aforementioned international rating organizations.

4. The Foreign Exchange Management Department and the Trading Department shall provide the General Supervision Department with necessary information on the State's foreign exchange reserves upon internal control requirements.

Article 21. Reporting System

1. The Foreign Exchange Management Department shall report to the Governor and the Management Board on the management of the State's foreign exchange reserves monthly, quarterly, annually, and for the planned year (also sent to the Monetary Policy Department and the General Supervision Department) within the following deadlines:

a. By the 10th day of the month following the reporting month;

b. By the 15th day of the first month of the quarter following the reporting quarter;

c. By January 25 of the following year for the annual report.

2. Annually or when necessary, the Foreign Exchange Management Department shall take the lead, coordinate with the Monetary Policy Department, the Trading Department, and the Financial Accounting Department to draft and submit to the Governor for approval, and then to the competent authorities according to the procedure stipulated in Clause 1, Article 19 of this Regulation, the following reports:

a. "Report on the implementation of the management of the State's foreign exchange reserves; actual use of the State's foreign exchange reserves" to be submitted to the Prime Minister (also sent to the Ministry of Finance);

b. "Report on fluctuations in the State's foreign exchange reserves" to be submitted to the Government and the Standing Committee of the National Assembly.

3. By February 15 each year or upon request, the State Bank must submit the reports mentioned in Clause 2 of this Article to the Prime Minister and the Standing Committee of the National Assembly.

Chapter 7

IMPLEMENTATION

Article 22. The Management Board for State Foreign Exchange Reserves

1. The Governor of the State Bank shall establish a Management Board for managing the State's foreign exchange reserves consisting of five members: one State Bank leader as the Chairman, the Head of the Foreign Exchange Management Department, the Head of the Monetary Policy Department, the Director of the Trading Department, and one Secretary of the Board.

2. The Management Board shall have the functions:

a. To advise the Governor of the State Bank on the contents prescribed in Articles 16 and 17 of this Regulation;

b. To manage the implementation of tasks related to the management of the State's foreign exchange reserves as prescribed by the Governor of the State Bank.

3. The tasks and operational regulations of the Management Board shall be stipulated by the Governor of the State Bank.

Article 23. Responsibilities of Departments and the Trading Department

1. The Monetary Policy Department shall take the lead, coordinate with relevant units to draft the amount of money supply for each period aimed at increasing the State's foreign exchange reserves and submit it to the Governor.

2. The Financial Accounting Department shall be responsible for guiding the accounting treatment of the State's foreign exchange reserves according to two funds and submit it to the Governor for decision.

3. The Trading Department shall be responsible for:

a. Establishing internal management principles to organize the implementation of the management of the State's foreign exchange reserves in accordance with the provisions of this Regulation;

b. Organizing the accounting treatment of transactions related to the State's foreign exchange reserves as prescribed by the Governor of the State Bank.

4. The Organization and Training Department shall take the lead, coordinate with the Foreign Exchange Management Department to draft the Decision on establishing the Management Board for the State's foreign exchange reserves and the operational regulations of the Management Board to be issued by the Governor of the State Bank.

5. The General Supervision Department shall be responsible for periodically or unexpectedly inspecting the implementation of the management of the State's foreign exchange reserves by the Departments and the Trading Department according to assigned tasks and compliance with the provisions of Decree No. 86/1999/NĐ-CP dated August 30, 1999 of the Government on the management of the State's foreign exchange reserves and this Regulation.

Article 24. Amendments and supplements to this Regulation shall be decided by the Governor of the State Bank.